With Ontario’s 2016 budget set to land next week, all eyes are on how the province plans to balance the remaining $7.5-billion deficit by the end of next fiscal year. But a new report is offering a different narrative, looking back at how the provincial deficit ballooned to that amount in the first place and suggesting it could have a multi-billion surplus instead.

THE CANADIAN PRESS/Darren Calabrese

The provincial books have been in the red since the 2008/09 recession, and many were sceptical the Liberals could balance by the long-promised 2017/18 deadline. They are expected to finally hit the black, but not before Ontario’s debt tops $298 billion sometime this year. And a new Fraser Institute report finds it didn’t need to be this way, in fact, it argues Ontario could have between a $10 and $15 billion surplus.

How?

If it had held spending growing to inflationary pressures over the past decade.

Prevailing logic has held that decreased revenues during the recession, cuts in federal transfers and investments intended to boost the economy increased the deficit, but Fraser Institute says spending decisions by the Liberal government was the biggest contributor.

“The string of deficits in Ontario and the resulting dramatic run-up in provincial debt was avoidable and not the result of factors beyond the provincial government’s control,” authors Ben Eisen, Charles Lammam and Milagros Palacios write in a bulletin released Thursday.

The authors argue that demands on Ontario’s services grew more slowly than spending. Between 2003 and this year, inflation and population in Ontario grew a combined 2.8 per cent, while nominal GDP grew 3.2 per cent, and government program spending grew an average of 4.7 per cent over the past decade. The authors in turn argue that, had Ontario kept spending to the level of GDP growth or even population demands, the 2016 budget would produce a major surplus.

“If the province had restrained program spending growth to the rate of the nominal GDP growth since 2003/04, the Ontario government would be projecting a $10.7 billion surplus this fiscal year instead of a $7.5-billion deficit,” the report states. “If program spending had been held to the pace of inflation plus population growth over the period, the surplus in 2015/16 would be even larger, at $15.1 billion.”

The value of a deficit, however, is in the eye of the beholder. Those who like the big programs the Liberals have built could defend those deficits as necessary. Tuition rebates and the Ontario Child Benefit have helped level the playing field for thousands of young people and long-overdue and still modest investments have been made to the welfare system.

And yet, balancing the books is important not just to how credit rating agencies rank the province, but also to business confidence. In a separate report released on Thursday, the Ontario Chamber of Commerce found that 92 per cent of its members consider balancing the books and tackling the debt a top priority. Interest payments already top $11 billion a year — the third-highest single program spending area behind health care and education and more than the province spends on its entire welfare system.

Its members also express concern on the possible costs of the pending cap-and-trade program, with 32 per cent hoping for clarity from the budget. And it calls on government to reinvest that money in programs that help businesses transition to a lower-carbon economy — something already underway with an announcement Wednesday of $100 million in grant money to do just that.